The panel discussion started and ended with a discussion about the future of point of sale payments as the future of mobile payments. Currently, mobile POS is already disrupting retail as there is not central checkout point in Apple stores and an Amazon store in Seattle allows customers to just walk out as they are billed automatically.

E-commerce transactions have a greater chance of fraud so there is an extra 30 basis points charged over in-store transactions. Ways to reduce fraud include phone biometrics, a separate digital id verification (Boloro) and text verification on your phone.

The future of in-store sales indicates that many traditional fixed console POS devices are becoming obsolete, but there was disagreement of the speed of this transformation especially for supermarkets and other low-margin, high capital costs stores. There is also the resistance of some retailers such as Walmart and Target to allowing NFC, contact-less transactions as this could compromise their ownership of the SKU, item-by-item purchase data.

Unfortunately, the panel did not get into the long term implications of regulations for these non-bank payment agents. As these services become larger and accept balances (such as is currently done by Paypal), they will come under increased scrutiny under the banking laws. These include deposit insurance, know your customer, anti-money laundering, and anti-discrimination laws. All of these will require additional costs and changes in privacy rules to tighten information available to consumers but allow greater access by regulators and law-enforcement agencies.

#Fintech Investing with Travis Skelly @FinTechCollective

Posted on February 4th, 2016

Travis talked enthusiastically about fintech startups, which he grouped into

#Banking – many are underbanked (challenger banks in UK)

#Lending – lendingClub, OnDeck, … what infrastructure do is needed to grow further

#CapitalMarkets – blockChain, cybercurrency,…

#Insurance – area with the least development so far

#WealthManagement – how to empower the investment advisors. (not enthusiastic about roboadvisors)

#Payments

Hi recent investments include

Inbroker – aims to disrupt the insurance industry by providing a place for companies to evaluate offers from different provider of property/casualty insurance.

Mines – use telecom data to underwrite to Nigerians. (90% of Nigerians don’t have access to credit)

Their portfolio includes

Slide – Focused on better monetization of gift cards. There are 130B gift cards issued each year of which 25% are never redeemed. You upload your gift cards to a wallet on the web and can transfer you balance to other cards or your bank account.

American Prison Data Systems – They provide Android tablets to prison inmates with the goal of reducing recidivism rates. Inmates use these tablets to improve their job skills as well as improve the factors that keep people out of prison in the future.

#Payments Investing with Jordan Bettman

Posted on June 25th, 2015

Jordan Bettman @BainCapitalVentures spoke about his experiences funding startup firms. BCV does lending from 3-5mm series A to 80mm majority recapitalization.

Jordan, who was interviewed by Derek Webster, concentrated on the opportunities he sees in his specialty: financial services. Jordan was excited by new ventures in insurance (For instance, there is a p2p auto insurance startup in Germany which underwrites using social networks). He also said there are lending startups that show promise.

Jordan talked extensively about commercial payments. He explained that electronic payments to merchants were pervasive, but the complexity of b2b payments has slowed the use of electronic systems. He cited the experience of Home Depot Services which accepted ACH, but subsequently stopped accepting it from commercial builders.

The lesson from this is that both accounts payable and accounts receivable need to be automated for the system to succeed. This is the context for two of their investments: Chrome River (AP) and Bill Trust(AR).

Jordan also talked about what he has learned.

The success of a startup is base on the founder’s ability to navigate issues in a changing world

Consider how the founder handled past mistakes

It now takes 7 years for a company to mature, so you are in for the long haul

Consider carefully the capabilities of established players to respond

Know what the company can do to defend its advantage

Founders have blind spots so it is important they hire quality people to fill those holes

He had views on the future of payment systems

Payment systems are dominated by large scale competitors with big cost advantages, so startups need to be revolutionary. (e.g. Strip can set up an account within 24 hours)

NFC will eventually gain acceptance as a payment method, but it will take time: domestically the current credit card experience is not broken. But the 3rd world, may skip the credit card stage and go directly to non-contact payment. (Similar to the pervasive use of mobile payment methods in Kenya)

Payment tokens (the 16 digit code is translated into a code) might be important if hacking attacks on phones increase.

Jordan closed with the following observations

The NY startup ecosystem has grown rapidly, but still does not have the gravitas of SF, with the possible exception of financial systems

Solvency & fairness are considerations when investing in insurance companies, but it will take time for the regulators to understand how social media and big data affect underwriting decisions.

Plaid is a startup which leverages their expertise in big data. They partner with banks to clean and standardize data.